Ed Jarvinen's Glossary
RETURN TO PREVIOUS PAGE
Introduction

With all of these market breadth charts, the usual technical analysis techniques can be applied. Major market rises or falls rarely occur without prior warning. Usually subtle changes can be observed in the technical indicators some time before these occurrences become apparent. When reading these charts, keep an eye on overbought / oversold conditions as well as trend. Lower tops in the waves will indicate loss of strength in the move, but not necessarily trend change.

The intention of these charts is to help guide the trader or investor to buying / selling opportunities, and to help them recognize current risk levels. Individual stock analysis and fundamentals are also important to minimize risk. Please become accustomed to learning the quirks of these indicators before attempting their use as trading tools.

We have also taken the liberty of applying many of the calculations to volume analysis.

Percentage Indices
The Percentage Indices measure the percentage of stocks above their own moving averages. They can be used to measure the overall market as well as any group of stocks, making useful tools for sector analysis.

These are some of the most reliable tools we have at our disposal because they identify periods of high and low risk. As with any percentage charts, they are confined to travel in a range between 0 and 100. Downturns from high levels suggest defensive action. Upturns from low levels suggest offensive action. Strongly overbought conditions occur at readings over 70, strongly oversold conditions occur at readings below 30. In some cases the charts may stall at around the 50% level before continuing or changing direction.

Like any chart, these are open to interpretation. Rises from very low levels are better buying opportunities and have less risk attached than rises from closer to 50%. Falls from high levels are usually the best opportunity to profit (if you have bought low). 

When applying the measures to small samplings of stocks, we have added exponential constants to smooth the chart action. Ideal strong trends are identifiable when the shorter term % indices operate above the longer term as in the case with multiple moving average systems. The difference here is the application to market breadth.

Divergence To Mean 
The Divergence to Mean measures a mid-term trend relative to a long-term trend with the figures derived from advance decline data. Dips to oversold are buying opportunities. The DTM is not intended to measure the overall trend, rather oscillations around it. The main purpose of the DTM is to reveal how far the market has strayed from average. The basic signal is the cross of the zero line. Also divergence from the price index can be seen in a similar fashion to observations in a Relative Strength Index.

Adv/Dec Haurlan 1%, 5%, and 10% Indices
The Haurlan indices are oscillators with essentially the same calculation as would be used in the standard advance decline line. The daily declining issues are subtracted from the daily advancing issues and added to yesterdays result. In this case, weightings are added to the latest numbers so as market sentiment changes, this is reflected in the chart. The various weightings carry relevance to short term, mid term, and long term trends.

The basic signal of the 5% & 10% indices is the crossing of the zero line. These charts are usually displayed together, with first signals to note being the 10% line crossing the 5% line.

The 1% Index is useful to identify primary trend and can be analysed as such. Trendline breaks, compressions, support and resistance can be observed in the chart.

Adv/Dec McClellen Oscillator
The McClellan Oscillator is calculated from advance decline data. The data is the result of the difference of 2 exponential moving averages. It is used to measure the first buying or selling pulse, the strength of the first move often taking it to an extreme reading. When the first move loses momentum, the chart will start a move back, lower tops becoming evident. Its major use is to help us identify the short-term rhythms. The chartist may wish to note time scale intervals in major tops and bottoms. If the chart hovers around zero, this expresses an indecisive market. A major break through the zero line can signal the beginning of trend changes, but this would need to be confirmed by the slower moving charts.

Adv/Dec Summation Index
The Summation Index is the cumulative data from the McClellan Oscillator calculated in a similar fashion to the advance decline line where today's result is added to yesterdays. In this case we display the data as an oscillator. The Summation Index  trends in a smooth action. It's main purpose is to help refine market breadth by showing general trend together with overbought / oversold conditions.

10/50 Day Buying Pressure %s
The %Buying Pressure is calculated from advance decline data and is another confirming indicator. Data is calculated by measuring advancing minus declining issues, divided by total changed issues (unchanged issues are ignored). Two simple moving trend lines are then generated and plotted. The short wave measures the first buying/selling pulse. If strength continues, the longer wave will confirm the trend.

10/50 Day Selling Pressure %s 
As per the 10/50 Day Buying Pressure %s, except applied to selling, therefore inverse.

Short Term Summary Index
The Short Term Summary Index is a compilation percentage index. The plot  compares all of today's indicators against their position 10 days prior. The charts returning positive figures are added, each indicator being worth a single point. This is then divided by the total number of charts measured, the resulting figure expressed as a percentage. The 10-day average is then calculated and charted. It is a very fast moving line shifting quickly between oversold and overbought levels. This sensitive line indicates change in short-term sentiment, and may be of use to day traders. The STSI main purpose is to further refine market breadth, giving us more clues to likely market changes. For example, if the seasoned chartist notices that other indicators are at extremely oversold conditions, he or she may wish to initiate buying when the STSI and STSI 10 Day move off their base positions. This should get you close to stop out conditions if the market sours again.

Courtesy Of Ed Jarvinen

Site design & maintenance by Nick Laird
All pages on this website are ©1998-2025 Gold Charts R Us - All Rights Reserved